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BC construction industry prepares for prompt payment

After watching Ontario get close to passing prompt payment legislation, the B.C. construction industry is starting to gear up for its own legislative push.

"We have a system that's evolved over time where it appears to be OK to have someone higher up the food chain decide they are going to build their buildings at the expense of trades. This is how business is done," said Dana Taylor, executive vice president of the Mechanical Contractors Association of B.C.

Taylor is one of the province's industry leaders attempting to garner unified support for legislation. He has already seen the Independent Contractors and Businesses Association (ICBA), the B.C. Construction Association (BCCA), the Association of Consulting Engineering Companies B.C. and other groups express their support for the efforts.

Taylor is also the interim chair for Council of Construction Trade Associations (COCTA) for B.C. which also supports prompt payment legislation.

According to many in the industry, legislation is needed because of the financial risk of projects shifted to subcontractors. The subcontractors are waiting for payment from contractors who may be waiting for payment from owners.

There are no provinces that have formal laws preventing contractors or owners from waiting months for payment.

Taylor said he's also organizing meetings with government officials to educate them on the issue and the facts.

"It's to create a level of fairness that doesn't exist," he said. "This should really be a nonpartisan issue. All around this is about making our system work better."

He said he hopes to have something to present to legislators in the fall. He explained that unlike Ontario, he would likely seek sponsorship rather than try and have a private member bill passed.

Manley McLachlan, BCCA president, said the issue, while complex, is integral to improving the industry. It affects businesses large and small. He said the BCCA will participate in the dialogue and use its government channels to advance the issue. McLachlan said they've already gotten the issue on the government's Infrastructure Forum agenda.

"From the BCCA board's perspective, this is one of our priority issues and it's fundamental to business operations in the construction industry," he said.

McLachlan added that the B.C. industry watched prompt payment legislative efforts in Ontario closely, noting they learned many lessons, such as concerns over how the Ontario bill would have meshed with the Builder's Lien Act, and the issue of billing on substantial completion of work versus invoicing. He said B.C. will have to do a good job of engaging the development community and the private sector so efforts aren't seen as a heavy handed approach meant to put up red tape. But, he's optimistic.

"I think it's a good issue, I think it's a fundamental issue and I think this government is certainly interested in trying to remove that as an impediment to doing business in B.C.," McLachlan said.

He predicted that before legislation, the industry is likely to see public policy and private sector requirements.

Ted Betts has been following prompt payment legislation efforts in Ontario and believes the fight is far from over in the province. Betts is a partner at Growlings LLP in Toronto and specializes in construction transactions.

Betts explained that Ontario's Bill 69, a private member bill that had its first reading May last year, hoped to tackle prompt payment three ways. First it would prohibit all holdbacks on a construction project other than those required under the Construction Lien Act. Second, it would impose mandatory payment terms on construction parties, both in terms of timing and consequences of non-payment. It would also establish new financial disclosure obligations for construction parties.

"It looked at one point that this would become legislation," he said, something that's nearly unheard of for a private member bill.

Trade contractors and general contractors ramped up sophisticated media campaigns supporting the bill.

Word spread that the premier might be backing it, and the bill received a second reading. Owners groups and municipalities, skeptical of the bill's consequences and concerned they hadn't been consulted, started their own letter writing campaigns to publications and distributing opinion papers.

"The devil is in the details," Betts said.

Betts said that while the legislation is meant to address a significant problem, it is painted with a broad brush, leading to many unintended consequences. For example, on multi-billion dollar infrastructure projects, payment is tied to work milestones, rather than dates to safeguard public spending. It could be subject to the same 30-day payment deadline as someone building a small storefront, though regulatory exemptions would likely be drafted after the bill becoming law, Betts said.

"The unintended consequences are when we try to stamp in a set way of doing things without thinking about how risk is allocated," Betts said. "That's where we need to vet things out and have a conversation about the full impact of legislation that is trying to address real problems."

Lawmakers shelved it, noting that no consultation of groups other than within the construction industry had been conducted. It's now waiting for a review panel to investigate the topic after an election that shuffled the province's political landscape.

Betts believes the shuffling will favour the bill. Steven Del Duca, an MPP who helped the bill gain momentum, is now the minister of transportation, which holds the single biggest construction mandate in the province.

Betts said the planned review panel and support of the industry shows that it is a topic that will eventually have be addressed.